After lengthy negotiations, Parkland Memorial Hospital leaders approved a 25-year rental agreement Wednesday that allows private construction of a community clinic in South Dallas.

The hospital’s board of managers agreed to spend up to $36.2 million total to rent the 44,000-square-foot clinic. Parkland also has the option of buying the clinic at a fair-market price after seven years.

“It was a complicated arrangement financially,” said Dorothy Hopkins, chief executive for Frazier Revitalization, the nonprofit developer of the project.

The project will include the new clinic and an adjacent complex that will house other community services.

Financing is through the Community Renewal Act of 2000, which provides seven-year federal tax credits for investors. Among the parties involved are J.P. Morgan Chase and the city of Dallas Development Fund, which provided $3 million.

Parkland will pay $29.50 per square foot, which was said to be slightly below the market rate. The amount will cover only the “base rent,” requiring Parkland to cover the additional cost of utilities, insurance and security.

The new facility at 4600 Scyene Road will replace the hospital’s East Dallas clinic at 3320 Live Oak St. Parkland officials said they are hoping to sell the old building once it is vacated.

The new facility is expected to be completed in spring 2015. The site is across the street from the Hatcher Station on Dallas Area Rapid Transit’s Green Line.

“This is an area of high patient population for us, and we think it will be good for the community,” said Parkland chairwoman Debbie Branson.

It is unusual for the public hospital to partner with a private organization to build a facility. Branson said the board considered the details carefully, including nearly two hours of talks behind closed doors, before approving the contract unanimously.

“We think it will be a good partnership with them,” she said of Frazier.

In past years, Parkland has built its own clinics with some financial contributions by host cities — most recently Grand Prairie and Irving.

The hospital will apply some federal funding toward the rental costs, using about $9.2 million from its share of the Texas 1115 Waiver agreement. The Medicaid funds are being channeled to local hospitals to expand medical services for low-income residents.

The clinic project, which broke ground in early May, replaces a strip of rundown businesses that were a blight to the surrounding residential community.

Don Williams, Frazier’s board chairman, said the project would be built in Dallas’ lowest-income ZIP code.

“This corner had a ‘hot-sheet’ motel, where there had been two murders the year before we bought it, plus prostitution and drugs,” he told the board. “We cleaned it up.”

One neighborhood resident, Lucy Cain, called the clinic “the most innovative project in South Dallas in many, many years.”

“People will have the opportunity to get health care but also the opportunity not to require emergency care,” Cain said.